Payments Perspectives Blog

The Facebook Copyright Caper: What It All Means

If you have a Facebook, you’ve seen it in the last few days: an explosion of status updates all claiming copyright on personal details and consent for external use. These nervous proclamations were ignited by recent changes to Facebook’s privacy policy, which suggested the social network is going to use the data it has collected about you (namely “likes”, geo-location and friends), to show you targeted ads outside your Facebook page. This is the first confirmation from the company that a user’s data will extend beyond Facebook’s own https:// and “sponsored stories” to external ad networks around the web.

Maybe this new strategy is a consequence of the pressure on Facebook to provide revenue in line with its $50 billion market capitalization – or maybe it’s to improve its struggling click-through mobile ad rate. In any case, Facebook’s undeniably strong traffic, coupled with its enormous trove of user information, has the ability to double the company’s revenues if it manages to attract enough advertisers. If so, Facebook’s model proves more effective at targeting consumers than current systems, which primarily derive ad preferences based on cookies dropped while browsing.

One site that can plausibly leverage targeted advertising is Instagram, Facebook’s $735 million purchase, which is currently ad-free. Previously, user data in Facebook and Instagram was “siloed,” which meant that programmers didn’t have access to both sets of data. By aggregating the two, Facebook would gain insight into highly predictive behavioral data, helping determine which ads become most relevant. This model doesn’t require the collection of any additional data, just combines what users already willingly share.

Even Facebook’s Chief Privacy Officer suggests an external ad network is probable, explaining “Everything you do and say on Facebook can be used to serve you ads. Our policy says that we can advertise services to you off of Facebook based on data we have on Facebook.”

From Facebook’s vantage point, external ads have the capability to bring in $10 billion in revenue each year and enhance the company’s financial prospects (stock price is already up 8% since the announcement). From the perspective of users, it forces them to confront the realities of what really funds the free internet experiences they’ve had to date.